Michael Knoll is the Theodore K. Warner Professor of Law at the University of Pennsylvania Law School, Professor of Real Estate at the Wharton School of the University of Pennsylvania, and Co-Director of the Center for Tax Law and Policy at the University of Pennsylvania. He also served as Deputy Dean of Penn Law from 2014 to 2016. Professor Knoll is an insightful commentator on how income tax laws affect business and investment decisions and a creative proponent of how those laws could be redesigned. Much of his recent research involves the application of finance principles to questions of international tax policy, especially the connection between taxation and competitiveness. Professor Knoll’s recent research includes writings on sovereign wealth funds, private equity, international tax arbitrage, the impact of the corporate income tax on the competitiveness of U.S. industries, and tax discrimination within the European Union and between the U.S. states.
- tax policy
- tax planning
- the application of finance to law
Many observers have asserted that the reduced corporate tax rate instituted by the 2017 Tax Cuts and Jobs Act (TCJA) has transformed entity choice for business owners, incentivizing owners of businesses structured as sole proprietorships or passthrough entities to incorporate their businesses and to use these new corporations as pocketbook investment vehicles to invest in and hold portfolio investments, substantially reducing wealthy individuals’ tax obligations and Treasury’s tax collections. This brief offers a different view, and discusses why predictions of widespread conversions to the corporate form at a substantial cost to the fiscal position of the U.S. are overstated. The brief explores the various purported tax advantages to incorporating, both when business owners are looking to invest substantial profits in portfolio assets, as well as when retained earnings are reinvested in the business and produce ordinary income.
A wave of corporate inversions by U.S. firms over the past two decades has generated substantial debate in academic, business, and policy circles. The core of the debate hinges on a couple of key economic questions: Do U.S. tax laws disadvantage U.S.-domiciled companies relative to their foreign competitors? And, if so, do inversions improve the competitiveness of U.S. multinational firms both abroad and at home? This brief summarizes both old and new research that views these questions through the lens of corporations’ global effective tax rates (ETRs), and finds that the stronger case seems to be that U.S.-domiciled corporations are often tax-disadvantaged and that they can improve their competitive position by inverting. Additional evidence also suggests that U.S. MNCs can increase their after-tax cash flow by inverting.
Other Policy Related Activities
U.S. International Trade Commission, Legal Advisor to Vice Chairman Anne Brunsdale, August 1986 ‐ March 1987
United States Court of Appeals for the Ninth Circuit, Law Clerk to Judge Alex Kozinski, January ‐ August 1986
U.S. International Trade Commission, Legal Advisor to Vice Chairman Susan Liebeler, October 1984 ‐ January 1986